fraud examination chapter 5 case study 2 457750

In his own words, Daniel Feussner was “The Dude”. With his waist long dreadlocks, part time rock band, and well paid job managing Microsoft’s online search directory”he seemed to have it all. Originally from Germany, Feussner, now age 32, earned his doctorate and taught at the University of Munich before coming to the U.S. where he started his career in computers. In 1996, Feussner started working with Microsoft as a director of operations for US Speech Engineering Services and Retrieval Technology”working on a new, closely guarded search engine tied to the company’s .NET concept.

Microsoft allows employees to order an unlimited amount of software and hardware, at no cost, for business purposes only. Between December year 1 and November year 2, Feussner ordered or used his assistant and other employees (including a high school intern) to order nearly 1700 pieces of software. He then resold them on the street for reduced prices”reaping more than $9 million. When items with a cost of goods sold of more than $1,000 are ordered, an e mail is sent to the employee’s direct supervisor, who must click on an “Approve” button before the order is filled. The loosely controlled internal ordering system reflects the trust the company has in its employees.

In June, FBI agents said they saw Feussner exchanging a large box of software for cash in a parking lot in Bellevue. The FBI contacted Microsoft security and began monitoring Feussner’s bank accounts. Previously, one account with a major bank had an average balance of $2,159. In a short time, the average balance ballooned to $129,775. Another account showed irregular deposits totaling $500,000″none of which appeared to be from any legitimate income.

Investigators also noted that Feussner purchased a $95,000 Ferrari F355 Berlinetta, a $36,000 Jaguar XJ6 and traded in lesser vehicles for a $37,000 black 1995 Hummer, a Mercedes 500SEL, and a $21,900 Harley Davidson. He also bought an $8,000 platinum diamond ring, a $2,230 Rolex wristwatch, and a $4,000 bracelet. For a relatively low level manager Fuessner’s lifestyle is impressive.

Steve Schnase, who lived across the street from Feussner, said his neighbor was clearly wealthy, but not flamboyant with his money. He described Feussner as an intelligent man who didn’t flaunt his education, would loan neighbors tools and was always friendly. Schnase was surprised when he heard the accusations.

“The Dude” was fired from Microsoft in December year 2, shortly after the fraud was discovered. He has been charged with 15 counts of wire, mail and computer fraud”with each count carrying a maximum of five years in prison. He is expected to remain in custody until a preliminary hearing set for Dec. 20, year 2.

Requirements

1. Describe the symptoms of fraud that might be evident to a fellow Microsoft employee.

2. Recently, Microsoft has been putting more emphasis on controlling costs. With the slowing of overall technology spending, executives have ordered managers to closely monitor expenses and have given vice presidents greater responsibility for balance sheets. What positive or negative consequences might this pose to Microsoft in future fraud prevention?

3. All frauds contain the following key elements: perceived pressure, perceived opportunity, and a way to rationalize the fraud. Describe how pressure and opportunity contributed to the Feussner fraud.

4. From the scenario, what are some of the methods Microsoft uses to prevent future frauds?